Smart questions to ask at tax time
Posted: Wednesday, February 2, 2011 6:01 pm
Brentwood – Last year, individuals who qualified for tax refunds got an average of $2,887, up 8 percent from the previous year.
While there’s no guarantee that you will receive a refund, there are steps you can take at this time of year that could not only potentially lower your tax bill but also enhance your overall financial situation.
The Tennessee Society of CPAs recommends you ask your CPA these questions.
What Do You Need
If you’ve been collecting receipts and financial statements in a shoebox throughout the year, now’s the time to sort through them so that your information is well organized when you meet with your CPA. This step won’t take a direct bite out of your tax bill, but it will make it more likely that you or your CPA can spot money-saving opportunities.
Try to categorize your documents into groups such as business vs. personal expense receipts, or statements of investment vs. earned income. If possible, add up the amounts in each category so that you can give your CPA an overall summary.
This advance organization will prevent repeated trips to bring your CPA newly discovered information. Equally important, it will help to give your CPA the best handle on your financial situation, so that he or she can identify deductions or other tax-advantaged opportunities you may have missed.
Are there Any Special Ways I Can Save on Taxes this Year?
Talk to your CPA about major projects, purchases or investments you’ve been involved in during the past year to find out if any of them trigger tax advantages. For example, did you know that it’s possible to receive a credit of up to 30 percent for qualifying residential energy efficiency enhancements, up to a maximum of $1,500 for improvements placed in service in 2009 and 2010?
And because it’s a credit, you can subtract that amount directly from your taxes owed. Your CPA can tell you whether you qualify for this and other money-saving credits or deductions.
What Should I Do Now to Save on Taxes Next Year?
Did you qualify for all the deductions available to you? Could you be paying less in taxes? Your CPA can analyze your return and tell you what changes might help you to lower your bill in the future.
For example, are you contributing the full allowable amount to a retirement savings plan? If not, you may be missing out on some significant tax advantages. You are also giving up the chance to get a head start on what could grow to be a significant nest egg when you’re ready to quit work.
How Can I Get a
Refunds sound like good news, but if you expect to receive a large one this year, that may be a sign that you’re having too much withheld from your paycheck. Refunds are really money the government has been holding on to that you could have been using yourself during the year.
Ask your CPA about whether adjustments to your withholding or estimated payments are called for.